Wait to buy out my aunt or buy now?

Question

I recently graduated and have been working as a Junior Estimator for about 8 months. I just qualified for 300k FHA loan, so I have been looking for multi-family rental properties. I'm excited to get started but... I'm also inheriting a house fairly soon (3-6 months). I was initially the only person on the deed but now my grandmother has added my aunt onto the house (who wants to sell, I do not). This is a triplex that is paid off in full. This house need quite a bit of work but once fixed would most likely sell for 350k. I want to get started with investing but am not sure if I should wait to figure out what is going to happen with my aunt and see how much she is looking for to be bought out.. Should I just start now and deal with this later or wait it out?

Adam Petterson · Answer

@Mo Nelson Im not sure what is the best strategy for you, but will give you my 2 cents on what I would personally do. I would take the property I am inheriting and cash out refinance in order to get enough money to pay off my aunt and fix up the property. Make sure you don't over leverage the property and that it will still cash flow. Once you have finalized that deal I would began to look at purchasing a multiunit property to owner occupy. With an FHA loan, you are only required 3.5% down (which you may be able to get by cashing out on your inherited house) and you are able to use future rents on the other units of the property you will be purchasing to help qualify for the loan. This is a potential way to keep the property you are inheriting and still qualify for a new FHA loan. Just a reminder, you can only have one FHA loan at a time. If I were you I would reach out to a lender in your area and talk through your situation with them to make sure you can qualify for both a refinance and a purchase.

Remember there may be tax consequences if you are to sell the property. When you refinance and take out debt you can get the cash you need, and will not have to pay any capital gains tax (you will actually have tax benefits involved as you can write off mortgage interest, fees, etc.)

Best of luck

Remember there may be tax consequences if you are to sell the property. When you refinance and take out debt you can get the cash you need, and will not have to pay any capital gains tax (you will actually have tax benefits involved as you can write off mortgage interest, fees, etc.)

Best of luck

Mo Nelson · Answer

Adam Petterson Thanks Adam! This really does help out with my situation.

Wait to buy out my aunt or buy now?

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